Math Problem Solver

XYZ Corporation is considering a capital budgeting project and requires a detailed analysis. The company has provided

you with the following financial information and ratios:

Return on Investment (ROI): 15%

Payback Period: 3 years

Net Present Value (NPV): R50,000

Internal Rate of Return (IRR): 12%

Cash Flows are as follows: Year 1: R20 000; Year 2: R30 000; Year 3: R40 000

Required:

1.1. Calculate the initial investment required for the project. (4 marks)

1.2. Discuss the significance of each ratio in evaluating the project. (8 marks)

1.3. Based on the given information, should XYZ Corporation undertake the project? Justify your answer. (8 marks)

1.4. Calculate the ARR for XYZ Corporation. Assume depreciation is calculated on the straight-line method

and that the project has a scrap value of R5000.